According to Markit’s Household Finance Index (HFI) prospects for finances over the coming year fell to 34.5 from 42.4 in September which was the fastest fall since the survey began in February 2009 and the lowest level in 6 months. Anything below 50 represented a decline.
Public sector workers were particularly pessimistic but UK households across the board were increasingly gloomy, according to these statistics. The background causing this decline in expectations is the weak market labour conditions, increased inflationary pressures and low wage growth.
Tim Moore, Senior Economist at Markit said “October was no exception with these unwelcome trends especially prevalent among public sector employees and the lowest income groups”.
UK households expect to continue erosion of their real incomes next year with 88% anticipating a rise in their living costs and just 31% forecasting increased income over the same period. The survey also found that 63% of public sector workers expected their household finances to worsen in the future with only 17% expecting an improvement.
People with a mortgage also showed a record level of pessimism about the outlook of their finances, with 59% expecting them to deteriorate.
Household savings remained under pressure and higher debt levels were recorded for the 7th consecutive month in October – the longest continuing period in the survey’s history.
Only those in the highest income group earning over £58,000 saw an overall decline in debt.
The sharpest rise in demand for unsecured borrowing was among those in the middle income band earning between £23,000 and £34,500.